NEW DELHI: India has been hit by a huge second coronavirus wave and the government has been responding to the latest outbreak with localised lockdowns as opposed to nationwide.
As such, S&P Global Ratings estimates $210 million in lost output daily in India due to the second Covid wave over April-June in a severe scenario model.
According to the rating agency, in a severe scenario, pandemic peaks late June, declines slower and mobility 40 per cent below normal, normalizes only by year-end.
It added that in such a case, initial shock relays through the economy via various channels - labour markets weaker, household incomes lower, warning that the growth number for 2021-22 will be significantly influenced by GDP growth outcome for January-March 2021
In a moderate scenario, pandemic peaks end May and mobility 25 to 30 per cent below normal before recovering by September.
The report said that limited vaccination coverage and exposure to more infectious Covid-19 variants may mean this infection wave peaks as late as June.
More extensive restrictions would prolong the pain of badly hit sectors, including retail and tourism.
Halts to domestic air traffic and subdued international travel may dismantle the fragile recovery for airports, the report said.
“Uncertainty is very high, starting with evolution of the pandemic itself. Also, fluid relationship with household and firm behavior. Still, declining mobility may stall activity for at least one if not two quarters. Limited policy space. Downside risk to our 11 per cent growth forecast for FY-22”, S&P Global Ratings said.
The policy space is constrained by inflation near the top end of the Reserve Bank of India’s target, it added.